Job change? 4 useful tips to deal with financial challenges
- Planning to change your job in the near future?
- If yes, then it is time you considered the financial implications that go along with.
- Changing jobs is often difficult, but it can actually become traumatic if your finances have been ill-organised
A job search may usually take three to six months to materialise. Also, there is no certainty that the pay hike you were promised by your prospective employer will come through the day you join your new office. Hence, you need a strong cash cushion that can last you at least six months.
Hence, if you are planning to switch jobs, here are some financial challenges you must expect and the steps you can take to sail through this transition.
Cash Crunch ForDay-To-Day Expenses
While your remuneration package in terms of “Cost To Company” may increase, your disposable income may actually decrease based on your new employer’s pay structure - if it follows a different style of compensation benefits. So, there is a need to change your spending pattern to put more disposable income in your savings kitty. Cut down on all “non-essential” investments before you are serious about a job switch. Minimise payroll deductions such as paying for charity or buying new bonds. Impulsive spending needs to be curtailed in this period. Start a short term liquid fund or Fixed Deposit into which you pile in your savings for a rainy day—you need that umbrella!
Adverse ChangesIn Your Retirement Plan
To absorb the impact of a job change, you should know how to minimise the financial fallout of your Retirement plan. To minimise the financial impact of your retirement plan, delay any action until you understand your options thoroughly. Since each employer-driven retirement plan is different, you must run a reality check. Would it be better to let it rest with your employer? Should you let the interests accrue or should you think of transferring it to your prospective employer? Under no circumstance should you think of cashing out. Some company rules make employees wait before they allow them to contribute to a retirement plan. This can significantly reduce your retirement benefits. Consider an alternate plan in the interim, such as opening and contributing to a traditional pension plan or opening a public provident fund (PPF) account. Else, park your assets into an already existing PPF account.
Reduced employer benefits
Two other significant issues that you must look into are related to employer benefits that accrue to you. How will the job change impact your present annual Health Insurance package? What are the group insurance scheme benefits that you draw from the present employer? If you're blessed enough to have annual income in excess of your saving and spending needs, you may have a qualified or non-qualified deferred compensation plan to handle. Although being rare, there are occasions in which group benefits—such as life, disability income, or long-term care insurance through your company—can also be converted into individual policies.
High Relocation Costs
Once you manage to find your dream job, you need to negotiate the relocation package. Is the new workplace far from your home town? If yes, then are you getting a fair deal by way of temporary boarding and lodging expenses? Find out if they are giving you enough money for your child’s half-completed education. Are the freight charges of your car and household goods being taken care of? Once you and your new employer agree on a compensation package for your relocation expenses, make sure you capture that agreement in writing. A formal contract may not be necessary—a signed letter detailing the assistance that is being provided may be good enough.
Once you address the above mentioned issues thoroughly, you are assured of a smooth job change, free from financial stress.
The author is CEO, BankBazaar